The government is amending regulations to simplify private-public partnerships (PPPs), making the procurement process less complex to draw in more private capital to state projects.
This forms part of wholesale reforms announced by finance minister Enoch Godongwana in his presentation of the medium-term budget policy statement (MTBPS) on Wednesday.
Infrastructure development is the linchpin of the government of national unity (GNU) as it plans to enhance investment into the economy, which has dragged for over a decade.
Fixed investment — an important factor in boosting job creation — has been hit hard in recent times as business confidence has deteriorated and firms have had to shore up finances amid plummeting economic activity and declining demand.
Reforms to derisking private investment into infrastructure include amending Treasury regulation 16, to be published before the end of next month for implementation in 2025/26. The municipal PPP regulations 309 will be finalised by June next year.
Business Day previously reported that the Treasury was finalising a credit guarantee scheme designed to attract private capital into investment in SA’s transmission infrastructure. This will begin with projects in the energy sector, with an “initial focus on independent transmission projects to bridge the energy transmission deficit and options to include other sectors over the medium term. The vehicle is expected to be operational by the end of 2025,” the Treasury said.
“This unified approach will bring together the PPP office and capital projects appraisal unit in the government technical advisory centre, and the capabilities in the infrastructure fund located in the Development Bank of Southern Africa. The consolidation of project preparation and financial structuring functions will strengthen planning and preparation, helping large-scale projects and programmes to reach financial close faster.
“In addition, the Treasury will make greater use of financial instruments such as dedicated bilateral loans, concessional financing and infrastructure bonds to fund large infrastructure projects. Engagements with the private sector, including by sourcing technical skills and facilitating contracting arrangements, will underpin delivery.”
Godongwana said various government departments and entities are already establishing dedicated capacity to plan, prepare and design programmes that will generate a credible pipeline of projects that can be taken to the market.
This includes the department of water & sanitation’s water partnerships office, which has two priority programmes for nonrevenue water and recycling wastewater that require private investment. The department of transport and the Passenger Rail Agency SA are finalising a list of priority projects that will be issued to the market in 2025/26.
“A request for proposals will be issued this year for funders who are interested in supporting these projects, as well as projects for urban rail revitalisation, disaster relief and metropolitan trading services. Funding for these will be separated from broader sovereign borrowing and be accounted for separately,” Godongwana said.
The Minerals Council SA, which represents some of SA’s largest listed companies, has welcomed the reforms.
“Improved public infrastructure spend will not only benefit mining through lowering the cost of doing business and unlocking latent growth potential, but also boost demand for mining-related building materials,” said Hugo Pienaar, chief economist at the Minerals Council.
Update: October 30 2024
This story has been updated with comment from Minerals Council SA.
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